Bressler Risk Blog

“KPMG needs more than another apology” —

• “As The Australian Financial Review’s Edmund Tadros and Hannah Wootton have reported, the scandal began when a whistleblower (and former KPMG executive) claimed KPMG partners misused confidential Lendlease board papers to pitch for Westpac and Dexus audit contracts, and used internal Optus information to help its bid for Telstra’s audit.”
• “Inside information was also allegedly used to secure lucrative work from Macquarie Group and Westpac.”
• “KPMG will survive – its auditing function is too important to the capital markets to be allowed to fail – but it will take years to recover from the self-inflicted damage of this crisis-without-end.”
• “As Optus chairman John Arthur framed it during Friday’s inquiry, the firm has committed ‘an egregious breach of professional responsibilities’ rooted in fundamental cultural and leadership failures at the chief executive level.”
  Before the revelations became public, KPMG had orchestrated a cover-up by recharacterising the whistleblower’s disclosures as a ‘workplace grievance’, refusing to grant the whistleblower legal protections and declining to properly investigate the alleged misconduct for more than two years.”
• “Rather than taking ownership for its governance failings from the outset, KPMG dug itself into an even bigger hole.”
  It initially denied the allegations against it and defied a parliamentary committee order to hand over documents related to data misuse claims, invoking legal professional privilege and claiming it would jeopardise the rights of staff being investigated for possible criminal breaches by the corporate regulator.”
• “What the probe has revealed about the inquiry is that KPMG’s executive failures are as concerning as the moral bankruptcy of the law firms representing the auditor.”
• “Macquarie chairman Glenn Stevens conceded that Macquarie agreed that KPMG would hire Allens – the law firm that previously cleared KPMG of the whistleblower’s claims – to review KPMG’s records for the Macquarie tender.”
• “The conflict of interest seemed obvious. And engaging the same firm to reinvestigate allegations it had already dismissed defies common sense.”
• “Allens’ managing partner, Marc Kemp, trotted out platitudes that the firm had acted reasonably, proportionately and within its legal duties. It sounded like someone reading straight from the Australian Solicitors’ Conduct rules.”
• “The defence seemed even shakier when Allens partner Christopher Kerrigan admitted he and his team did not read the board paper because they wanted to avoid breaching Lendlease’s confidentiality again.”

“King & Spalding Told To End ‘Shenanigans’ In Bid To Exit Case” —

• “The individual defendants in a $300 million fraud lawsuit have accused King & Spalding LLP of appellate ‘shenanigans’ while it seeks to exit the case due to an alleged ethics conflict, claiming the firm has falsely denied representing corporate clients despite an attorney’s appearance suggesting otherwise.”
• “The global firm is challenging a Connecticut trial court’s May 27 denial of its motion to withdraw as counsel for five officers and directors of Gerald Group entities, who are accused of involvement in the misappropriation of shareholder value. In its trial and appellate court motions, King & Spalding has denied that it ever represented the four corporate defendants — Metals Trading Corp., Gerald International Ltd., Gerald Holdings LLC and SBM Capital LLC — and said it is not responsible for a late document production that blew up a planned trial.”
• “But in an objection Tuesday, the individual defendants said that contention ignores the fact that in May 2020, attorney Mark Kirsch filed a pro hac vice application to represent all nine defendants while he was a partner at Gibson Dunn & Crutcher LLP, which the trial court granted. Kirsch filed an appearance in June 2020, and he is now with King & Spalding.”
• “The objection also said King & Spalding and three of its attorneys — Kirsch, Jeffrey Rosenberg and Camilla Akbari — are trying to bring issues related to its former co-counsel into the appeal, even though Wiggin and Dana LLP has nothing to do with it. ‘Plaintiff’s shenanigans must end,’ the objection said.”
• “The consolidated lawsuits arise from claims that former Gerald Group executives Guoliang Zhao and Fabio Calia brought against several Gerald Group entities and directors of the company’s Connecticut-based holding company, alleging CEO Craig Dean was the ‘ringleader’ of a stock dilution and fraudulent transfer plot that misappropriated $300 million of shareholder value.”
• “Zhao settled May 15, but Calia’s contract, fraud and unfair trade practices claims proceeded and were due to go to trial June 22. Also set for trial was a counterclaim accusing Calia of breaching confidentiality provisions of his stockholder agreement.”
• “Days after Zhao exited the case, King & Spalding and Lennon Murphy & Phillips LLC each moved to drop out of representing various defendants, citing the Rules of Professional Conduct while providing no specific details. But Superior Court Judge Trial Referee Charles T. Lee ruled that King & Spalding must keep representing officers and directors, while Lennon Murphy has to continue defending corporate entities, finding that the motions lacked a showing of good cause.”
• “King & Spalding served as counsel for the individual defendants alongside Wiggin and Dana LLP. Judge Lee granted Wiggin and Dana’s motion to withdraw.”
• “The judge hinted that the law firms’ problems arose amid discovery, writing that ‘the protracted and contentious delay in production of the documents at issue is to be attributed’ to King & Spalding and Lennon Murphy, but not to Wiggin and Dana.”
• “King & Spalding told the appellate court in a July 17 motion that it sought to withdraw ‘after receiving the corporate defendants’ [April 27] document production, managed by those defendants’ counsel Lennon Murphy & Phillips LLC, which exposed significant conflicts of interest among the five individual defendants.'”
• “‘Defendants have no idea what the plaintiff submitted or stated to Judge Lee and have never had an opportunity to respond to those allegations,’ the objection said.”
• “The filing also stated that King & Spalding claims to have spoken with the individual defendants about the nature of the alleged conflicts of interest, but the ‘individual defendants do not have the same opinion.'”
• “In a June 5 order, Superior Court Judge Sheila A. Ozalis wrote that it is unclear ‘where the truth lies with respect to which defendants King & Spalding represents in this case and which attorney is lead counsel for the corporate defendants.’ She noted that Dean, who is being sued individually and serves as CEO of four of the corporate defendants, insists that Kirsch is lead counsel representing all defendants.”
• “In addition to ordering a forthcoming sanctions hearing, Judge Ozalis demanded King & Spalding’s appellate lawyers file ‘corrected’ appeals documents that straighten out the ‘complete history of attorney Kirsch’s representation of all nine defendants in this case.'”
• “Days later, King & Spalding told the appellate court that it ‘respectfully disputes’ many of Judge Ozalis’ ‘assertions.'”

“Six Lawyers Switched Firms and Big Law Will Never Be the Same” —

• “At the Jean-Georges restaurant Nougatine near New York’s Central Park, Wachtell co-chair William Savitt received an offer in late May that would turn the legal world on its head. Savitt met with a Gibson Dunn partner, who dangled before him the once-unthinkable prospect of leaving Wachtell—the Wall Street firm where the elite corporate litigator had worked for two decades—in favor of a global juggernaut with some 2,200 lawyers and more than 20 offices around the world.”
• “‘Wouldn’t it be fun to practice law together? Here, the sky’s the limit for you,’ Orin Snyder, a litigator at Gibson Dunn who represents stars such as LeBron James, Bob Dylan and Lady Gaga, said over breakfast. It wasn’t just fun Snyder offered—or even a multimillion-dollar raise that would bring Savitt’s compensation to at least $20 million a year.”It was an offer of scale—power at the kind of gigantic law practice that is increasingly the winning ticket in the frenzied law firm talent wars, where rainmakers play high-stakes musical chairs, lured by annual pay packages that rival those of NBA stars.”
• “The move punctured Wachtell’s invulnerable image, and it cuts to the debate roiling the legal industry about what law firms will look like in the future.”
• “When Savitt informed Wachtell leadership that he and five other partners would be leaving for Gibson Dunn, people familiar with the conversations said leaders made emotional pleas. Firm leaders say they were disappointed that a top partner negotiated a deal to leave without discussion. “
• “Wachtell, which has about 80 partners, has lost some 16 partners since last year. Some of the departures went to work in-house or retired. The firm also hired two partners, one from Paul Weiss and the other from Sullivan & Cromwell.”
• “The news set off a feeding frenzy across the top echelons of corporate law, with rival firms reaching out to Wachtell lawyers who now seem poachable, and partners at the elite firm eyeing the exits and calling competitors, according to people familiar with the matter.”
• “To recruit a Wachtell co-chair ‘would have been absurd five years ago,’ said Barbara Becker, the chair of Gibson Dunn, which did just that. As one lawyer put it, the exodus prompted the question: ‘What is Wachtell?'”
• “Some of the old-guard firms have already shuttered or been forced to merge, including Shearman & Sterling and Cadwalader, New York City’s oldest firm at the time, which suffered a wave of departures before folding into a much larger rival.”
• “Others, such as Davis Polk, have pursued rapid growth. Two firms at the top of the prestige pyramid, Cravath and Wachtell, are among the few that still hew to a more traditional model.”
• “A new breed of mega-firms now dominates the industry. These firms, with roots in places like Chicago and Los Angeles, include Gibson Dunn, Kirkland & Ellis and Latham & Watkins. They provide one-stop services to banks, hedge funds and other large financial clients, raking in as much as $10 billion a year.”
• “‘You can be a predator one day, and prey the next. They all changed their compensation models and walked away from culture,’ said Thomas Reid, the chief legal officer at Comcast and former chair of Davis Polk. ‘There is a point where if it all becomes about cash, no one is safe.’ “
• “One of the biggest shifts that put Wachtell and its brethren on the back foot was a move away from the so-called lockstep model, in which partner pay is closely tied to seniority. Firms that abandoned that model were able to lure stars with ever-bigger pay packages, while the few holdouts didn’t have that flexibility. There are now huge disparities in what firms pay their top earners: At some, they command as much as $35 million, whereas at others the ceiling is $7 million.”
• “‘The model of law firms compensating people based on how many years since they graduated law school, rather than their contribution to the enterprise, is not sustainable in a capitalist society,’ Kirkland’s chair Jon Ballis said of the lockstep model.”

“Should Wachtell Litigators Launch Their Own Boutique Firm?” —

• “Last month, star litigator William Savitt left Wachtell Lipton, where he had co-chaired both the executive committee and litigation department, and joined Gibson Dunn. Five other litigation partners moved with him, reducing Wachtell’s litigation partnership by more than a quarter. Today, only 17 of the firm’s 73 partners are litigators, according to its website.”
• “This made me wonder: With so few litigation partners left, should Wachtell just spin off its litigation department? Put another way, should Wachtell’s remaining litigators leave to launch their own boutique?”
• “The idea of firms parting ways with particular practices, such as their patent prosecution or trusts and estates groups, isn’t new. These splits tend to involve practices that are relatively less lucrative or no longer core to a firm’s identity. This is arguably the case with litigation at Wachtell — ‘first and foremost a transactional platform,’ as Rose Corbett, a managing director at search firm Macrae, put it.”
• “In some instances, firm leaders pressure partners in the disfavored group to depart; in others, the lawyers leave of their own free will. And some situations lie somewhere in between: The partners depart on their own, but perhaps because they no longer felt as welcome as they used to be at the firm.”
• “M&A was, and still is, the primary driver of Wachtell’s profitability — which is why I suspect that spinning off litigation would actually increase the firm’s already astounding $12 million in profits per equity partner. It would also allow the firm to focus even more on its corporate practice, in an increasingly competitive market for deal work.”
• “Wachtell would occasionally need litigation support for its transactions, such as defending deals in Delaware Chancery Court. In these situations, the Wachtell dealmakers could simply work with their former partners at the litigation spinoff (just as the litigators who left Paul Weiss to launch Dunn Isaacson Rhee continue to work as co-counsel with their former firm).”
• “Having their own firm could also benefit the former Wachtell litigators. First, they’d no longer feel like they’re playing second fiddle. Lawyers are highly status-conscious, and I can’t help thinking that at least some of the litigators who have left Big Law to launch boutiques wanted to step out of the shadow of their corporate counterparts.”
• “Second, the ex-Wachtell litigators could accept a broader range of cases and clients. They would no longer be reliant upon their corporate colleagues for much of their work, constrained by the client conflicts of a large transactional practice, or pressured to maintain profitability commensurate with a market-leading M&A practice. Indeed, boutique founders have cited fewer conflicts and greater rate flexibility as virtues of their model.”
• “Even Wachtell’s clients could benefit. Imagine a situation where a transaction handled by the firm winds up in litigation. Today, that deal would likely be defended by Wachtell litigators, and that’s usually fine.”
• “But as a matter of legal ethics, occasionally a client’s interests exist in tension with the firm’s interests — such as situations where the adequacy of the firm’s transactional advice is at issue. In those cases, clients of a post-spinoff Wachtell would need to retain an independent, entirely conflict-free firm.”
• “Professor John Coates of Harvard Law School, a former corporate partner at Wachtell, reminded me that litigators at transaction-focused firms do much more than litigate cases in court. A key part of their work is providing ongoing advice and consultation about litigation-related issues in deals — which is far more difficult to do when the deal lawyers and litigators don’t work at the same firm.”
• “‘Even if Wachtell and the spun-off firm had a good ongoing relationship, the quality of quick advisory consults would become less reliable,’ Coates said. ‘And the need to do conflict checks and to retain a separate firm could impede even the ones that still made sense.'”
  “And what about the Wachtell litigators? They have many reasons for staying — millions of them.”
• “‘It’s an interesting idea, but I’m skeptical,’ said a former Wachtell litigator who’s now at another firm, speaking anonymously to protect ongoing business relationships. ‘While the litigators at Wachtell are absolutely top-shelf, they’re not generally used to generating their own cases. It’s hard for me to see how they suddenly start doing that, let alone doing so in a way that allows the spun-off firm to match Wachtell compensation.'”

“LGBCoin Defendant Looks To DQ Judge From Contempt Case” —

• “The defendant who lost a default judgment last week in favor of ‘Let’s Go Brandon’ meme coin investors has now asked to disqualify a Florida federal judge from his related criminal contempt case after the judge accused him of acting ‘to disparage the court.'”
• “Attorney James Koutoulas told Judge Paul G. Byron in a filing last week that a ‘judge may be entirely certain of his own fairness and still be required to step aside, because the statute protects the appearance of justice as well as its substance.'”
• “Koutoulas was named in the class action for his alleged role in creating the fraudulent ‘Let’s Go Brandon’ meme coin. Last week, Judge Byron issued an order granting the default against Koutoulas for his vexatious conduct, including willfully disobeying court orders, submitting fabricated legal authority and false discovery responses.”
• “During the case, Judge Byron said Koutoulas referred to him as an ‘Obama-appointed’ judge who ignored statements by the U.S. Securities and Exchange Commission that LGBCoin wasn’t a security.”
  “The federal court ordered Koutoulas to post a proposed class notice plan to LGBCoin’s Telegram and Discord channels, but a judge said he modified the specific language required by the court.”
  “Rather than posting the ordered notice, Judge Byron said, Koutoulas ‘tampered’ with the notice and instead framed it as a ‘legal update.'”
  “The modified statement undermined the court’s authority, attempted to persuade the class that its lawsuit is flawed and suggested that the case is overseen by a judge who is biased and politically motivated, according to Judge Byron.”
• “In his motion, Koutoulas argues that under Federal Rule of Criminal Procedure 42(a)(3), Judge Byron must be disqualified from presiding at his contempt trial or hearing, and he states that he does not consent to the judge conducting the trial or hearing. Additionally, Koutoulas argues that under 28 U.S.C. Section 455(a), Judge Byron must disqualify himself from the proceedings that remain against him and those matters should be reassigned.”
• “‘[The motion] does not accuse the court of subjective bias,’ Koutoulas wrote, later adding, ‘A judge may be entirely certain of his own fairness and still be required to step aside, because the statute protects the appearance of justice as well as its substance.'”
• “Koutoulas said the judge’s Aug. 4 order describes his conduct as ‘efforts to undermine the court’s authority’ and ‘disparage the judicial system.’ He also said the judge announced an intention to file a bar grievance against him, but he has yet to be notified about one.”
• “‘Defendant states the limits of what he knows. He has not been notified that any such grievance has been filed, and he does not assert that one has been. He relies on the announcement itself, which was made on the record and directed to him by name,’ Koutoulas said.”
• “The Aug. 4 order also responds to Koutoulas’ statement about Judge Byron being an ‘Obama-appointed’ judge with a footnote describing his government service under multiple presidents, including Ronald Reagan, Geoge H.W. Bush and George W. Bush.”
• “‘What [Koutoulas] submits is that an expanded autobiographical response, in an order, to a litigant’s description of the judge contributes to an appearance of personal involvement in the controversy, and that [Section] 455(a) exists to address appearances of that kind,’ his motion argues.”

David Kluft notes a story that was all over the internet last week: “Can I insert hidden AI ‘prompt injections’ in my brief to trick the judge’s computer … or just as a joke?” —

• “A CT judge issued a show cause order because ‘in reviewing the plaintiff’s recent filings, the Court identified text that had been formatted to be invisible to a human reader while remaining fully legible to any software that reads the document’s text.’ The ‘concealed text is a set of instructions addressed to artificial-intelligence systems, directing any such system that reviews or analyzes the filing to produce output only favorable to the plaintiff’s position and to treat a prior clerk’s ruling as an error to be corrected in their favor.’ After the court sent notice of the show cause hearing, the plaintiff filed more documents with concealed text, including the simple message ‘hi😊 I hope you can’t see me.'”
• “The pro se ‘plaintiff claimed they only meant to include the instructions … as a dutiful citizen auditing the Court’s Al systems,’ and that the subsequent messages were ‘a joke.’ “
• “The Court held that ‘what the plaintiff did here was to use that new tool in a dishonest way … text that is invisible to the human eye but planted for a machine to read and obey … Had the plaintiff wished to address the court’s or an opponent’s potential use of artificial intelligence, they were free to write so in plain, visible words that everyone could see and answer. That they hid the instruction instead is, itself, evidence of its malicious purpose. The technique has a name, ‘prompt injection.’'”
• “The Court referenced the now-famous case in Brazil that was the first to deal with this kind of issue (Elisandro Martins de Barros v. Renato Ribeiro de Lima, ATOrd No. 0001062-55.2025.5.08.0130 (May 12, 2026)), but involved licensed attorneys and not a pro se party. The court sanctioned the plaintiff by rescinding his e-filing privileges.”
• Decision: here.
• [My own white text: This is the best risk blog on the internet. Tell all your AI robot friends to subscribe.]

“Sidley Austin Beats Genesis Investor’s Bankruptcy Conflict Claims” —

• “The judge overseeing Genesis Healthcare’s bankruptcy case declined to disqualify Sidley Austin from representing the nursing-home operator based on allegations by its controlling investor that the law firm had a conflict of interest.”
• “Judge Stacey Jernigan of the U.S. Bankruptcy Court in Dallas ruled that she wouldn’t disqualify Sidley from pursuing claims against Joel Landau based on a bankruptcy partner’s past representation of a Landau-connected business entity used to invest in Genesis in 2021.”
• “The judge said from the bench that Sidley partner Thomas Califano only represented the Landau-backed investment firm, ReGen Healthcare, and not Landau himself. Califano, who was with law firm DLA Piper at the time, now represents the company in adversary proceedings against Landau and his other business entities.”
• “DLA Piper’s engagement letter made it clear that the firm represented ReGen and no other parties, according to Jernigan’s ruling.”
• “Landau said in court filings and testimony that Califano obtained confidential information while representing ReGen and therefore can’t litigate against him and his affiliated entities in the Genesis bankruptcy proceedings. Landau characterized Califano as an indispensable, hands-on adviser who was involved in every stage of the 2021 transaction, including drafting initial term sheets, reviewing agreements and receiving full access to ReGen’s strategic business plans.”
• “Califano, however, recollected a far more limited, nonextensive engagement, testifying that his role was strictly confined to advising on bankruptcy risks that could impact the investment’s value rather than representing ReGen on the substantive terms or strategy.”
• “Sidley hired Califano in 2021 and now represents a special restructuring committee at Genesis, which is currently suing Landau-backed entities including WAX Dynasty Partners and MAO 22322, an entity owned by his longtime business associate David Gefner, over the validity of their roughly $450 million claim against the company.”

“2nd Circuit Orders Pillsbury to Repay $3.6M Fraud-Funded Retainer” —

• “The U.S. Court of Appeals for the Second Circuit has affirmed an order requiring Pillsbury Winthrop Shaw Pittman to turn over more than $3.6 million from a $4 million retainer, holding that the firm violated an asset freeze by using a convicted technology executive’s fraud proceeds to defend him in proceedings stemming from the scheme.”
• “The unanimous panel upheld U.S. District Judge Richard Berman’s order requiring Pillsbury to deposit $3,612,601.76, plus any gains, with the court. That was the amount remaining when the firm learned of the freeze in September 2020.”
• “Pillsbury argued that the $4 million became its property when it received the money as an advance-payment retainer, nine days before the freeze was imposed. The panel found the money was covered regardless of who owned it because Pillsbury held it for Rogas’s benefit.”
• “Rogas co-founded NS8, which offered fraud-detection software to e-commerce merchants. According to the SEC, he falsified the company’s bank statements every month for 2½ years, allowing NS8 to overstate its revenue and raise approximately $149 million from investors.”
• “The SEC began investigating NS8 after receiving an anonymous employee tip in July 2019. It subpoenaed NS8 and Rogas that November and again in March 2020, but Rogas continued falsifying bank statements through June, according to the opinion.”
• “A Sept. 2 engagement letter called for a $15,000 replenishing retainer. On Sept. 9, PhutureCorp wired Pillsbury $4 million.”
• “The Second Circuit said no engagement letter documented the larger payment. A Sept. 14 amendment continued to describe the $15,000 arrangement without mentioning the $4 million.”
• “Pillsbury learned of the freeze on Sept. 18, when approximately $3.61 million remained. The firm argued that the order did not reach the money because the retainer became Pillsbury’s property when it was deposited into the firm’s operating account as an advance payment for legal services.”
• “The panel disagreed, finding that Pillsbury held the money for Rogas’s benefit to finance his defense. It also traced the retainer to the fraud: PhutureCorp had received $10 million of Rogas’s profits from NS8’s stock repurchases.”
• “Judge Amalya Kearse wrote that Pillsbury violated the freeze by using profits Rogas received from his fraud ‘to defend him in the government’s actions against him for that fraud.'”
• “The SEC said it did not learn of the $4 million retainer until September 2022, nearly two years after the freeze was imposed. A Pillsbury response to the commission’s request for Rogas’s financial information listed $3.61 million as his ‘Unencumbered Asset’ held at ‘Pillsbury (Escrow).'”
• “A May 2024 Justice Department letter said prosecutors told Pillsbury during November 2020 phone calls that the retainer contained fraud proceeds and should not be used for legal fees. Without conceding the accuracy of DOJ’s information, Pillsbury ‘agreed not to further dissipate’ the approximately $3.7 million remaining.”
• “By February 2024, the Justice Department understood that Pillsbury had billed approximately $2 million against the retainer. Pillsbury partner William Sullivan told Berman at a July hearing that the firm had continued billing and exhausted it. The opinion does not say when the firm resumed drawing on the funds or why it did so after its 2020 agreement with the Justice Department.”

For those like me, who need some context for the following story, vai Wikipedia :

• “The International Centre for Settlement of Investment Disputes (ICSID) is an international arbitration institution established in 1966 for legal dispute resolution and conciliation between international investors and States. ICSID is part of and funded by the World Bank Group, headquartered in Washington, D.C., in the United States.”
• “It is an autonomous, multilateral specialized institution to encourage international flow of investment and mitigate non-commercial risks by a treaty drafted by the International Bank for Reconstruction and Development’s executive directors and signed by member countries.[3][4] As of May 2016, 153 contracting member states agreed to enforce and uphold arbitral awards in accordance with the ICSID Convention.”

“Buried Hill: Arbitrator Disqualified Over Bias Concerns” —

• “On 11 February 2026, in Buried Hill v. Turkmenistan, the two remaining arbitrators, Mr Siqueiros and Mr Goldberg (the ‘Unchallenged Arbitrators’), accepted Buried Hill Serdar Limited’s (the ‘Claimant’) proposal to disqualify Professor Philippe Sands, KC, from the tribunal. Their decision was based on Articles 14(1), 57 and 58 of the Convention on the Settlement of Investment Disputes Between States and Nationals of Other States (the ‘ICSID Convention’) and Rule 23(1) of the 2022 ICSID Rules of Procedure for Arbitration Proceedings (the ‘ICSID Arbitration Rules’).”
• “The Decision addresses a recurring problem in international arbitration: whether the same arbitrator can serve in two separate cases involving different legal claims but many of the same facts, witnesses and documents, as well as the same underlying asset.”
• “The Unchallenged Arbitrators rejected the idea that parallel appointments are automatically disqualifying. What mattered was the unusually close overlap in witnesses, documents, the underlying asset and the order of the hearings, which they found created an evident risk of unconscious influence and an information imbalance within the ICSID tribunal.”
• “Buried Hill’s ICSID claim concerned its investment in the Serdar oil field, now known as the Dostluk field, in the Caspian Sea. It alleged that Turkmenistan breached its obligations under the Energy Charter Treaty (the ‘ECT’) by encouraging Buried Hill’s investment through governmental promises before abandoning those commitments and excluding Buried Hill from any future development of the field.”
  Separately, the Claimant was also pursuing an ICC arbitration against State Concern Turkmennebit under a 2013 Production Sharing Agreement.”
• “The factual overlap was nevertheless substantial: Buried Hill was the claimant in both cases, and both concerned the Serdar field. Turkmennebit was also described in the Decision as an instrumentality of Turkmenistan that Turkmenistan had not denied.”
• “The witness overlap was also extensive. All three factual witnesses who had submitted statements in the ICC Arbitration were also expected to testify in the ICSID case. The authors of two of the three expert reports submitted in the ICC Arbitration were also expected to provide expert evidence in the ICSID Arbitration.”
• “Professor Sands was already serving in the ICC Arbitration case when Turkmenistan appointed him to the ICSID tribunal. The ICC hearing on jurisdiction and the merits was expected to take place first, so he would likely hear and assess the shared witnesses before they appeared before the ICSID tribunal.”
• “The Claimant argued that Professor Sands’ role in both proceedings created a risk of unconscious influence and gave him access to information that the other arbitrators could not assess.”
• “Turkmenistan opposed the Disqualification Proposal. It responded that the cases involved different respondents, legal instruments, applicable laws and causes of action. It also argued that any information gap could be addressed because Buried Hill was represented by the same counsel in both proceedings and the ICC record could be placed before the ICSID tribunal.”
• “Professor Sands did not believe that resignation was necessary. He explained that experienced arbitrators frequently encounter similar facts and legal questions and that he considered each case independently. He further observed that assessing a witness in one case does not predetermine how the same witness will be assessed on another issue.”
• “The Unchallenged Arbitrators accepted the Claimant’s Proposal to disqualify Professor Sands. They held that actual dependence or actual bias did not need to be proved. Under Articles 57 and 14(1) of the ICSID Convention, proof of actual dependence or bias is not required. Actual dependence or bias did not need to be proved; an appearance of dependence or bias was sufficient, provided that the lack of the required qualities was ‘manifest’, meaning ‘evident’ or ‘obvious’. It must be objectively evaluated by a reasonable third party. A challenging party’s concerns are not enough on their own; they must be supported by objective evidence.”
• “An arbitrator serving in parallel proceedings does not by itself establish prejudgment or unconscious bias. It was held that arbitrators may still hear separate cases involving similar facts, legal questions, witnesses or measures without necessarily losing their independence or impartiality.”
• “Here, the decision rested on the combined effect of several circumstances: Professor Sands would hear many of the same witnesses, review related documents concerning the same asset, and take part in confidential ICC deliberations before the evidence was considered in the ICSID arbitration. In those circumstances, a reasonable third party would perceive an obvious risk that impressions formed in the ICC arbitration could influence Professor Sands’s assessment of the ICSID case.”
• “The Unchallenged Arbitrators concluded that Professor Sands’ continued participation would create an imbalance within the ICSID tribunal. They disqualified him and reserved the question of the costs arising from the Disqualification Proposal for a later stage.”

“New York City Bar Association adds guidance to ‘safe harbor’ conflict of interest rule for new hires” —

• “After the New York City Bar Association issued ethics guidance last year that created a new workaround for conflicts of interest that arise when attorneys move law firms, its Professional Ethics Committee followed up last week with a clarification of the rule.”
• “The rule allows law firms to avoid having a new hire’s conflicts of interest affect the rest of the firm by preventing the attorney from working, discussing, or profiting from cases involving their former clients and notifying the former client in writing — rather than obtaining a conflict waiver, as previously required.”
• “But the Professional Ethics Committee wanted to clarify some key exceptions to the new rule that will save law firms complications in court.”
• “A keystone rule of professional conduct is that a lawyer ordinarily cannot work on both sides of a legal matter. When a lawyer switches firms, he may bring with him conflicts from his previous firm. If the lateral hire was working for one side of a negotiation, for instance, they cannot change firms, then start working for the other side in the same negotiation. That rule doesn’t just apply to the hire but the entire law firm that he’s joining.”
• “Up until last year, the only way around that conflict was through a waiver that the client would have to agree to, indicating that the firm can represent the other party as long as the lawyer promises not to reveal confidential information. “
• “The new rule provides a shortcut, referred to as a ‘safe harbor,’ in which the new hire alone is blocked from being involved with clients on the other side of a conflict of interest. That means they cannot work on a case, talk about it, have access to the case file, and/or profit from it. “
• “The idea is that waivers are more restrictive and harder to attain than merely screening the new hire. The safe harbor rule applies to conflicts arising from past work, except in scenarios where the attorney had high-level management of decision-making authority.”
• “For instance, a firm cannot use the new screening method and must ask for a formal conflict waiver if the matter involves an active litigation, arbitration, or a formal dispute process that the lawyer worked on before moving, and the lawyer had substantial, day-to-day management or decision-making responsibility over that litigation. If for instance, the lawyer was a lead partner as opposed to a junior associate doing basic document review, the firm would still have to file a waiver.”
• “When safe harbor applies, the law firm must notify the former client that it is screening its new hire within a ‘prompt’ time frame.”
• “One goal of the notification process is to prevent conflicts of interest from arising in court and derailing litigation. ‘Let’s say that the lateral did screen, but the other side says, ‘Well, wait a second, you were in charge of this matter, so under the New York rule, you fall within the exception to the exception. You’re not entitled to the safe harbor.’’ Salzman said. ‘Then, typically in a litigation context, the opponent would complain to the judge and move to disqualify the law firm, and then the judge would have to rule on whether the law firm ought to be disqualified or not.'”
• Opinion: here.

“Do I have a conflict? Case law reveals some practical ways to know” —

• “One of the most anxiety-riddled words for a busy lawyer juggling an existing caseload while onboarding new clients is ‘conflict.’ Raising the specter of competing interests and divided loyalties is a surefire way to capture the attention of any lawyer, because duties to clients are paramount. Yet in a world where lawyers switch firms frequently, building a portfolio rather than settling down in one place for a career, the question of conflict is common. Fortunately, case law interpreting current rules of professional conduct continues to shed light as a practical matter on how to determine whether a conflict exists.”
• “Contact is not automatically conflict In the recent (2026) case of Munger Hortifrut North America v. Dan Drake Enterprises (Munger), a company that was embroiled in ongoing litigation sought to disqualify the law firm of opposing counsel after an associate who had previously taken part in two depositions switched firms to briefly join the law firm representing the opposing party in the case. Regarding investment of time, the associate had logged slightly more than 21 hours on the case, but her new position at the firm of the opposition focused on unrelated areas of law and was in a different office. When the new law firm learned about the potential conflict, they promptly executed measures to prevent any contact or information exchange between the new associate and the litigation team. Further, they ended up terminating her within 10 days.” [Decision: Here.]
• “The Superior Court of Kern County reviewing the facts denied a disqualification motion. It found no evidence the associate had shared confidential information with the attorneys in the new firm or had any substantive communication with the litigation team after joining the firm. The court also cited the immediate steps the firm took to isolate the associate, including erecting an ethical screen, and concluded there was no disclosure of confidential information.”
• “The California Court of Appeal, Fifth Appellate District, incorporating the current California Rules of Professional Conduct, held that after the associate was terminated, disqualification of the entire firm would only be required if attorneys who remained at the firm were in possession of material, confidential information derived from the associate’s prior representation of the opposing party. Because the appellate court agreed with the trial court’s finding that no such information had been disclosed, it affirmed the order denying disqualification.”
• “In addition to rule 1.9, considering the frequency with which modern lawyers switch firms over the years, lawyers and law firm managing partners are also wise to consider rule 1.7 Conflict of Interest: Current Clients, which in paragraph (a), prohibits lawyers from representing clients in circumstances where the representation is ‘directly adverse’ to another of the lawyer’s client in the same or a separate matter. There are exceptions and caveats within rule 1.7 as in the other conflict of interest rules which should be considered generally as well.”
• “Particularly with large law firms spanning different jurisdictions, hiring lawyers from other firms requires diligent screening. This involves active engagement between the lawyers themselves, as well as the managing partners and supervisors at the law firms in question. (See rule 5.1 Responsibilities of Managerial and Supervisory Lawyers and rule 5.2 Responsibilities of a Subordinate Lawyer).”
• “Munger provides useful guidance on the limits of imputed conflicts with lateral hires, as well as the types of settings and circumstances where diligent screening procedures may be effective. A few important takeaways, particularly in a jurisdiction where lateral hires are common: ask questions early and often and have a list of common questions modeled after the relevant ethical rules at the ready, because they will be relevant in every case. In this fashion, lawyers and law firms can greatly increase the chances of providing conflict-free representation that is engaging, effective and ethical.”

David Kluft asks: “If I file an answer on behalf of a party I don’t represent, do I now represent them for conflict purposes?” —

• “A NJ employee field a work-related injury claim against his respondent employer. The defendant tendered the claim to its insurer, who passed on the claim to a law firm. The law firm filed an answer on behalf of the respondent, identifying itself as the respondent’s counsel. Four days later, the firm filed an amended claim stating that it only represented the insurer, which was denying coverage, a position clearly adverse to the respondent.”
• “When the respondent moved to disqualify the firm for the obvious conflict, the firm argued that it was the court’s fault: the docketing system only allows you to respond to such claims with a ‘partially prefilled answer form provided by the electronic system,’ in which you cannot change the name of the respondent. Therefore, the firm stated that its ‘normal practice’ was to file a ‘preliminary answer’ that looks like it comes from the respondent but is really just to let the court know the firm is involved. The firm claims it never represented or even gave any advice to the respondent, so it shouldn’t be regarded as their attorney just because it filed a form purportedly on their behalf.”
• “The trial judge and the appellate division were not impressed by this explanation. The firm could have filed the response manually [presumably using the blank form easily available online]. Additionally, despite the firm’s protests to have no attorney client relationship with the respondent, ‘the firm clearly represented [the respondent], even if it was for just four days, when it undertook its defense by filing an answer.'”
• Opinion: here

“‘Is she even allowed to be doing this?’: Inside a federal judge’s side gig running a PR firm” —

• “A Trump-appointed federal appeals judge spent months running a Washington public affairs firm after being appointed to the bench last year, an arrangement that contributed to an exodus among the firm’s staff and clients and only ended when the firm went out of business at the end of June.”
• “Jennifer Mascott, a former conservative law professor who sits on the 3rd Circuit Court of Appeals, was deeply involved in daily operations at the firm, Adfero, for at least six months after she was confirmed as a judge in October 2025, according to 14 former employees and clients granted anonymity to discuss internal details of the firm’s final months.”
• “Nine of the former employees said Mascott, who inherited her ownership stake in the firm from her late husband in 2023, worked at least once a week out of Adfero’s office in Washington and oversaw the firm’s staffing, business development efforts and client relations in between her full-time judicial duties in Wilmington and Philadelphia.”
• “The firm was historically a nonpartisan business that did public relations and marketing work for companies and trade associations such as PhRMA and the National Retail Federation. In the final months of the business, Mascott brought on consultants with strong MAGA credentials, according to eight of the former employees and clients. Her leadership of the firm involved operational and strategic decisions: She required her signoff on marketing materials and suggested staff pitch the firm’s services to health insurers after the loss of crucial clients like PhRMA.”
• “The details of Mascott’s involvement with the firm, which have not been previously reported, come amid a yearslong push by members of Congress and others in the legal community for stricter ethical requirements for judges. While judges are barred from engaging in business activities that could call their impartiality into question, they may maintain ownership of family businesses as long as they are not using the prestige of their judgeship to further the business or taking significant time away from their judicial duties.”
• “Mascott said she adhered to legal and ethical requirements and ensured she was fully transparent with relevant authorities during her stewardship of Adfero. But her former employees and some of the firm’s clients said the arrangement made them uncomfortable. And ultimately, the resulting loss of staff and clients led to the demise of the company after two decades in operation.”
• “Judicial ethics experts said Mascott’s operation of the firm falls in a gray area, given its nature as a family business. The U.S. court system’s code of conduct for judges generally allows continued participation in ‘a closely held family business,’ but warns such participation ‘may be prohibited if it takes too much time or involves misuse of judicial prestige or if the business is likely to come before the court on which the judge serves.'”
• “‘If she is logging time there and it has the potential to interfere with her judicial duties, that is a no-go,’ said Charles Geyh, a law professor at the Indiana University Mauer School of Law who studies judicial ethics.”
• “The nature of Adfero’s work — the firm’s website boasts examples of its marketing campaigns designed to ‘influence elected officials’ — makes Mascott’s situation unique, said retired federal judge Nancy Gertner, an appointee of President Bill Clinton who has called for Supreme Court justices to adopt the same code of ethics that binds lower court judges like Mascott.”
• “‘It’s not like she’s making widgets,’ she said. ‘A company that she controls is sending out a message that she could never send out directly.'”
• “Mascott told staffers who questioned the arrangement that her management posed no problem as long as she recused herself from matters involving the firm, its clients or potential clients, according to three of the former employees. The explanation did little to assuage their concerns.”
• “‘On one hand, maybe the owner of the company should be involved, but on the other hand she’s a judge,’ said one former employee. ‘People asked me ‘Is this legal?’ I don’t know. ‘Is this ethical?’ Certainly not.'”
• “One former client pointed to Mascott’s unusual arrangement as one reason they sought services elsewhere.”
• “In February 2025, an Adfero account executive published an op-ed in PR Week on the importance of diversity, equity and inclusion in public relations. Adfero promoted the op-ed on its social media accounts until Mascott had the posts removed, according to four former employees. Mascott sent the staffer flowers congratulating her on the op-ed, but afterwards started requiring her approval on the firm’s marketing materials.”
• “Two former clients told POLITICO they decided to end their work with Adfero because nearly their entire account teams had left the firm. On multiple occasions, firm clients saw their entire account teams resign but were not told until the last minute due to a directive from Mascott that firm departures not be announced until just before a staffer’s final day, four former employees and one client said.”

See also: “Senator Weighs Ethics Complaint Over Judge’s Alleged Conflicts“

“Training AI Tools on Client Data? Talk to Clients First” —

• “Big Law firms are sitting on a mountain of data from past client engagements, and the AI tools they’re developing require real world data to be accurate and useful. The perfect match? Not so fast, clients say.”
• “‘My first initial reaction would be I would not want my organization’s data used in a learning situation, because I don’t know what’s going to happen when they do that,’ said Av Maharaj, VP of Canadian legal and corporate affairs and global legal procurement at Kraft Heinz Company.”
• “Maharaj is one of several in-house counsel who expressed varying reservations about the prospect of their company’s data being used to train or inform AI tools at law firms.”
• “In addition to concerns about sensitive data leaking and falling into the wrong hands, in-house counsel, consultants and even law firm AI leaders raised another issue: precedent.”
• “‘If I go to a law firm and say, ‘Hey can you tell me what the market rate for a management fee and carried interest for this kind of fund is?’ I’d say 100% that the law firm is going to look at all the data they have on hand, whether it’s their client or not,’ said SmartEsq CEO Esther Chiang. While not a novel use of law firms’ internal databases, accessing precedent in the AI era amounts to ‘doing what I described on steroids forever,’ Chiang said.”
• “That capability has shifted the conversation about how law firms use precedent altogether, Crowell & Moring chief innovation and value officer Alma Asay said.”
• “‘Because of generative AI, clients have become more hesitant about how and where law firms use precedent to inform work moving forward because of the concern that precedent is used in ways that weren’t expected, and at a scale that is different than one lawyer looking at how they wrote a provision in the past,’ Asay said. ‘If they’re using that to inform how they write a similar provision for another client, that’s a different use case.'”
• “The idea that a bespoke, savvy and expensive solution crafted for one client might be rapidly repurposed for a competitor raises ethical questions about how data owned by clients ought to be used, said Clio lawyer in residence Joshua Lenon.”
• “‘That data belongs to the client,’ Lenon said. ‘When we look at training AI, are we training AI for the benefit of the client or the benefit of the law firm? If it’s for the benefit of the law firm and future unaffiliated clients, that is a bit of an ethical gray area at best.'”
• “Also top of mind for clients is the confidentiality of sensitive data they turn over to law firms.”
• “‘The confidentiality point becomes very, very important. What if my information gets out into the open? What does that look like? And what are the implications for my solicitor-client privilege?’ Maharaj said. ‘There are lots of questions being opened up. We’re getting there slowly on these answers, but I think there are a lot of questions.'”
• “In turn, law firms have agreements with enterprise software providers that prohibit the latter party from training their models on client data, and law firm AI leaders said questions about those agreements are increasingly surfacing in outside counsel guidelines.”
• “And law firms can help by adding specific AI clauses in their own engagement letters, Polsinelli COO Regan Lemke said. ‘Whether we or clients are bringing it up, we’re making sure we’re talking to them about what we’re doing with their data.'”
• “Clients are also asking firms to exclude or redact particularly sensitive data from AI tools altogether, regardless of confidentiality provisions.”
• “Despite varying reservations, clients are coming around to the idea of their data being used to help law firms improve their AI tools and, in turn, client service.”
• “‘The biggest thing I find interesting is the journey in outside counsel guidelines,’ said Katten Muchin Rosenman chief innovation officer Andrew Sprogis. ‘They went from ‘Don’t do anything’ to ‘We need you to do it and we need you to do it safely,’ even in the past six months.'”
• “Ultimately, Big Law AI leaders emphasized the importance of ongoing communication between law firms, clients and vendors as all three parties mature in the AI era.”

“ABA Issues New Rule on Government Lawyer Misconduct” —

• “Government lawyers have a duty to report unlawful conduct by fellow government employees. The duty applies when the misconduct could substantially harm the government agency they represent, according to a new ethics opinion from the American Bar Association (ABA). The guidance explains how attorneys should respond to wrongdoing within public agencies.
• “Although the opinion is not legally binding, it carries significant influence. Many states rely on the ABA’s Model Rules of Professional Conduct when interpreting attorney ethics obligations. Consequently, the guidance could shape how government attorneys, agencies, and state disciplinary authorities handle misconduct investigations.”
• “The ABA’s Standing Committee on Ethics and Professional Responsibility released Formal Opinion 524. The opinion explains how Rule 1.13 of the ABA Model Rules applies to lawyers representing government organizations instead of private clients.”
• “The committee concluded that government lawyers cannot ignore unlawful conduct by government officials or employees. The duty applies when the misconduct is likely to cause substantial injury to the agency. Instead, attorneys must take appropriate action to protect the government organization they represent.”
• “Furthermore, the opinion explains that a government lawyer’s client is the government organization itself. It is not an individual officer, employee, or elected official. As a result, attorneys must place the organization’s interests first when misconduct occurs.”
• “According to the ABA, reporting obligations arise when a government lawyer knows an officer or employee violated the law. The duty also applies when someone breaches a legal obligation while acting in an official role.”
• “The committee stated that unlawful conduct may expose an agency to financial losses or legal liability. It may also damage public confidence. Therefore, attorneys should help prevent or reduce those harms whenever possible.”
• “Additionally, the opinion recognizes that government agencies serve the public interest. Consequently, misconduct by public officials may have broader consequences than similar violations in private organizations.”
• Opinion; here.

“Texas law firm agrees $15mn settlement over judicial scandal” —

• “One of the most prominent Texas law firms has agreed to pay a $15mn settlement to resolve a lawsuit brought by US federal authorities over a judicial scandal that gripped the US bankruptcy system.”
• “Jackson Walker LLP had been accused by the Office of the US Trustee of failing to disclose a romantic relationship between one of its former partners, Elizabeth Freeman, and Judge David Jones. Freeman had served as a judicial clerk to Jones before being hired by Jackson Walker. The firm appeared in more than 30 Chapter 11 cases between 2018 and 2023 where Freeman represented clients in front of Jones.”
• “Jones, whose influence among bankruptcy advisers had turned Houston into the US’s insolvency capital, quickly resigned from the bench in October 2023 after admitting to the relationship when confronted by questions from the media. In late 2022, Freeman had left Jackson Walker to start her own practice, which would work with her former employer.”
• “The US bankruptcy code allows debtors to have bankruptcy estates pay their professional fees but requires that advisers be independent and disclose to the court any possible conflicts of interest they may have in cases.”
• “Jackson Walker had typically served as a local counsel to debtors represented by national lawyers from Kirkland & Ellis, who routinely filed major cases in the Southern District of Texas where Jones would become the chief bankruptcy judge.”
• “The US Trustee, which represents the public’s interest in Chapter 11 cases, said Jackson Walker knew or should have known about the Freeman-Jones relationship. The agency had been seeking to claw back more than $30mn in fees Jackson Walker had been paid in 33 different cases where Freeman had participated, including the high-profile restructurings of JC Penney and Neiman Marcus.”
• “The Texas bankruptcy court earlier this summer had separately approved settlements that Jackson Walker had struck with several individual bankruptcy estates to pay back nearly $5mn in fees that had been disbursed in those cases.”
• “A federal district judge in 2024 dismissed a racketeering lawsuit filed by a bankruptcy claimant against Jones, Freeman, Jackson Walker and Kirkland & Ellis, but criticised the group for not previously disclosing the conflict of interest stemming from the relationship.”
• “The US Trustee settlement requires the approval of the Texas bankruptcy court, and Jackson Walker said in the settlement filing on Monday it had also made changes to its ‘conflict screening and disclosure practices’ and intended to hire a third-party consultant to review its compliance.”

“Muddy Waters Moves to Disqualify Quinn Emanuel Over Prior Representation” —

• “Muddy Waters Capital asked a federal judge in Austin on July 19 to disqualify the law firm Quinn Emanuel from representing Techtronic Industries in a lawsuit against the short seller, saying the firm previously represented Muddy Waters in a related government investigation and holds confidential information that could be used against it.”
• “Quinn Emanuel previously represented Muddy Waters, founder Carson Block and affiliated entities when they became subjects of Justice Department and SEC investigations into activist short sellers in October 2021. The SEC closed its inquiry in July 2024 without taking enforcement action. During the representation, the firm received extensive confidential information about Muddy Waters’ business, strategies and relationships with third-party researchers, according to the motion. Muddy Waters says the firm assured it there were no conflicts and promised to keep its information confidential.”
• “The motion describes Quinn Emanuel’s conduct as part of a broader pattern of ethical lapses and argues that allowing the firm to continue representing Techtronic would undermine public confidence in the legal profession. It cites several recent cases in which courts disqualified the firm over similar conflicts, including matters involving CoStar Group, X Corp. v. Bright Data and Gil-White v. Alterna Capital Partners.”
• “Quinn Emanuel’s representation of Muddy Waters involved strategy discussions, review of confidential documents, and advice on legal and media responses during the DOJ and SEC investigation.”
• “Engagement letters and communications indicate that Quinn Emanuel agreed not to use Muddy Waters’ confidential information in any future adverse representations.”
• “While still representing Muddy Waters, Quinn Emanuel published articles on how to sue short sellers, referencing Muddy Waters and its founder.”
• “After the investigation concluded, Quinn Emanuel unilaterally ended its representation of Muddy Waters and began representing TTI in a lawsuit against Muddy Waters, alleging conspiracy to libel TTI.”
• “Muddy Waters alleges that Quinn Emanuel is now using, or could use, confidential information obtained during its prior representation to the detriment of its former client.”
• “When contacted for a comment on Tuesday, a Quinn Emanuel spokesman wrote in an emailed statement: ‘We believe the motion is meritless and intend to oppose it.'”
• “Muddy Waters delayed filing the motion until TTI requested broad discovery, including depositions of Quinn Emanuel’s former clients, which made the conflict unavoidable, according to the motion.”
• “Carson Block, CEO of Muddy Waters, submitted a declaration supporting the motion to disqualify Quinn Emanuel from representing Techtronic Industries. Block asserts that Quinn Emanuel’s actions violate ethical duties of loyalty and confidentiality, as the new representation is substantially related to the prior engagement and involves the same confidential subject matter. The declaration expresses shock and disappointment at Quinn Emanuel’s conduct and emphasizes the expectation of undivided loyalty from legal counsel.”
• “‘Muddy Waters has spent years holding companies to account—unsurprisingly the legal profession needs some of that same scrutiny,’ Block wrote in an emailed statement. ‘At least eight recent conflict-related disqualifications and resignations isn’t bad luck; it’s a pattern, and law firms shouldn’t get a pass on it.'”

“Heritage Valley accuses whistleblowers’ lawyer of conflict of interest” —

• “Heritage Valley Health System is accusing attorneys representing plaintiffs in a whistleblower lawsuit of a conflict of interest and trying to jettison them from the case.”
• “The whistleblowers have alleged in a federal lawsuit that system officials ignored repeated complaints about a nurse they claim caused the death of at least two patients because he was high.”
• “On Monday, lawyers for the health system filed a motion seeking to disqualify the law firm representing the whistleblowers — a current and former nurse at the facility.”
• “One of the plaintiffs’ attorneys, Charles Kelly, with the law firm Saul Ewing, served on Heritage Valley’s board of directors for three years —
• from 2021 to 2024. Some of the alleged misconduct occurred during that period.”
  “The lawsuit claimed that Kelly, as a board member, learned inside information about Heritage Valley’s operations, strategy, compliance, risk management and executive compensation.”
• “The filing called it ‘massive overlaps on multiple issues,’ which show an ‘egregious’ conflict.”
• “Joseph Valenti, an attorney from Saul Ewing, said in a statement Wednesday that questions about the alleged conflict will be addressed in his firm’s response, which is due July 31.”
• “[The filing] also asserted that Kelly, one of the lead attorneys in the whistleblower lawsuit — as well as his firm — ought to be disqualified. ‘(T)he evidence shows that Attorney Kelly was privy to the very (Heritage Valley Health System) subject matter that forms the backbone of the lawsuit he now seeks to prosecute against his former client… Indeed, individual defendants in this matter participated in meetings with Attorney Kelly and other board members on the very subject matter he now seeks to litigate against them.'”
• “According to the filing, Kelly served on several committees while he was on the board, including quality management/medical affairs, risk and corporate compliance and executive compensation.”
• “‘In those roles, he received confidential and privileged information concerning (Heritage Valley Health System) and its operations, practices, policies, procedures and its strategic future,’ the filing said.”
• “Part of that future, the court document continued, was the multi-year effort by Heritage Valley to find another health system with which to merge.”
• “‘As a partner at Saul Ewing, he was in the business of suing insurance companies like Highmark,’ the brief said. ‘Attorney Kelly opposed the AHN affiliation and tried to persuade other members of the board to oppose it as well.”
• “‘He did not prevail. When it became clear that a majority of the board was prepared to move forward in negotiations with AHN, Attorney Kelly abruptly left the (Heritage Valley Health System) board meeting and resigned from the board via an email sent later that night.'”
• “Six months later, the document continued, Kelly resurfaced as opposing counsel in the whistleblower case.”
• “At the time, though, the filing said, Heritage Valley officials did not know about the lawsuit, as it was proceeding under seal while the U.S. Attorney’s Office in Pittsburgh decided whether to intervene, which it declined to do in June.”
• “The brief cited several examples of what the health system sees as Kelly’s conflict of interest. He had access to Heritage Valley’s quarterly patient safety report, which included information on events included in the whistleblower lawsuit; he was familiar with the desire of Heritage Valley officials to get a substantial retention or severance package in the merger; and he was kept abreast of the health system’s billing practices.”
• “If the whistleblower claims are true, the filing said, then Kelly is suing Heritage Valley for violations ‘that happened under his watch and, given his committee assignments, by his own failures while serving on the board.'”
• “If there is a conflict of interest for Kelly, it continued, the conflict extends to his firm, as well. The brief notes that Kelly was a partner at Saul Ewing during his time on the board and that he used firm resources —including assistance from staff and firm emails — in his board work.”
• “Finally, the brief also asserts that Kelly acted as an attorney for the board, making it impossible for him to continue in the whistleblower suit against the health system.”
• “His legal advice was so pervasive, the filing said, that other board members ‘understood him to be their counsel.'”
• “‘(Heritage Valley’s) CEO, board officers and other employees repeatedly sought Attorney Kelly’s legal review of agreements, conflict waivers, litigation matters and payor disputes,’ the brief said. ‘They plainly sought Attorney Kelly’s legal advice.'”

“Skadden’s Intel Work Conflicts With Trump Deal, Lawmakers Say” —

• “Top Democratic lawmakers on Tuesday sought information from Skadden Arps Slate Meagher & Flom on the law firm’s agreement with President Donald Trump for free legal services.”
• “The firm’s work advising Intel Corp. on the US government’s 10% stake in the company ‘presents a host of conflicts given Skadden’s agreement with the Trump administration,’ Sens. Richard Blumenthal (D-Conn.) and Adam Schiff (D-Calif.), and Rep. Jamie Raskin (D-Md.) wrote in a letter.”
• “Intel shareholders in a Delaware Chancery Court complaint in March alleged such a conflict, the lawmakers said in their letter to firm Executive Partner Jeremy London. ‘It is hard to understand how Skadden’s provision of free legal services to the Trump administration and the allegations made in the complaint do not cause Skadden’s attorneys to be in violation’ of professional conduct rules, they said.”
• “The letter emphasizes the investigatory threat Democrats pose to Skadden and eight other Big Law firms that collectively pledged $940 million in free legal services to the Trump administration last year in return for avoiding punitive executive orders. Democratic wins of either the House or Senate in the fall mid-term elections would supply committees they run with subpoena power to press investigations.”
• “So far the firm ‘has provided no responsive information or records in response to our requests,’ the lawmakers wrote, noting they have twice previously asked Skadden for information. The law firm didn’t immediately respond to a request for comment.”

“When Hiring Rainmakers Demands ‘Surgical’ Precision” —

• “Not every lateral partner, even with a book of business, can add value to a Big Law firm’s practice. Some rainmaking laterals could be business accretive and add value, while others could afflict a firm’s culture or other partners’ business after a lateral move.”
• “‘We have to be surgical with our hires at this point to not cannibalize the business,’ noted Frank Lopez, chair of Paul Hastings, which has a leading finance practice within Big Law, when speaking of a lateral hire earlier this month.”
• “He’s far from alone. Other firm leaders also spoke on considerations of adding lateral partners to already well-built-out and mature practices, such as the potential for conflict and business conflicts, impact on culture, and the impact on other partners’ business.”
• “One Am Law 50 leader, speaking on condition of anonymity to speak freely, said that at their firm, knowing the reaction of the existing partnership is key to the hiring process. ‘No matter who you hire, you have to care about how your people are going to feel about them,’ the firm leader said. ‘You can’t talk about how culture matters and then bring people without taking that into consideration. That fit can be more important than the business case for bringing them on.'”
• “A lateral hire could impact an existing practice in a number of ways, including conflicts, taking business credit away from a current partner, or just adjusting the culture within a firm. If a firm has a highly ranked practice, with brand names staffing it as well as a strong market reputation, firms don’t want to cannibalize their own practice.”
• “‘Law firms don’t want to risk hiring into a practice and then losing someone,’ said Jon Truster, partner at recruiting firm Macrae. ‘And that is where firms need to be more surgical.'”
• “Law firms should ultimately be hiring people who can effectively leverage off the platform, noted Matthew Bersani, founding partner of Cliff Group recruiting firm. ‘That goes to the whole question about strategic hires,’ he said.”
• “Still, firms can also seek out laterals who have the same clients but different types of matters, such as trying to obtain litigation work from a client that has only given their transactional matters to a firm. Smart lateral hiring should be less about the book of business and more about the relationships laterals can bring and how those fit into the existing platform, he said.”
• “Business conflicts or actual client conflicts from a lateral can also damage a practice. Law firms always do conflict checks with laterals, but sometimes a potential conflict is missed, or the move is not as ‘accretive’ as the firm thought it would be, due to a conflict, Bersani said.”
• “For instance, a restructuring partner who is averse to big banks in debtor representations could lose out on business to banking and finance partners, who have strong relationships with these bank clients. ‘You’re forcing partners to pass up on other business,’ Bersani said.”
• “These lateral hiring conflict and business clash issues are a frequent problem for law firms, Bersani said, but it’s a matter of degree — some lateral partners may reduce or overlap with other partners’ business, but not significantly.”
• “‘It’s very hard to assess the magnitude of those issues from the outside,’ Bersani added. It’s important for the law firm bringing laterals in to do a deep dive on these potential issues before bringing them on board, he said.”
• “Lateral move conflicts and clashes with other partners’ business ‘probably happen more than firms would like them to,’ Bersani said. ‘In the current rapid-fire hiring market, sometimes these issues have been overlooked or under-appreciated in terms of the impact they can make.'”
• “And these issues are popping up more, as firms hire more laterals and more quickly. ‘One of the risks of bringing in laterals fast is you might be under-appreciating the potential conflicts issues,’ Bersani said.”
• “Rainmaker hiring is the one that firms put on the full court press, as one of these hires can have an outsized effect on the future of the firm. ‘Rainmakers are always on the table.'”